Okay I first must admit - I listen to talk radio when I am driving - I think it is a genetic thing my grandmother did (she actually listened to Larry King). Anyway during the day my only choice is Rush Limbaugh and Neal Boortz- AirAmerica had a short stint in my area - but disappeared - but that is another diary.
So about 2 weeks ago a caller called in to Neal Boortz’s show to discuss the economics of Oil. The caller told Boortz that he was not supplying the public the complete information about Oil and the prices. He started out with the comment that Oil companies like Chevron, Exxon, etc buy oil on 5 year contracts. Then he started to explain what he meant by that. What caught my attention beyond the content was how FAST Boortz started shutting him down and then hung up on him - before the caller could explain and further. Okay, I was curious but not enough to motivate me to research what the caller was discussing. And from listening the Boortz - the nature of his show he will hang up on a caller - if they do not follow his lead.
Today, I was listening to Limbaugh and guess what? A caller brings up that Oil companies buy oil in 5 year increments. Limbaugh responds with the Southwest story about how they bought on contract and not all companies do that. The caller corrects Limbaugh and said the Oil companies that buy on 5 year contracts. There was some static from Limbaugh and then Limbaugh said something like: you are saying that the oil companies are getting the oil for $60 a barrel and selling it to us at the going rate of $140 a barrel? Surprise Limbaugh disconnected this guy and it was if the conversation never happened.
Now, I am really curious. So do the oil companies really buy/contract on 5 year increments? If that is true then why is gas so high? Why is diesel even higher? I understand the economics of supply and demand - but if the oil is already purchased at a fixed price (let just say last year - about $60) why are the consumers prices so high?
Why has congress not closed the loop holes that allow banks and hedge funds to speculate on Oil - that raises the price of oil? That brings us the CFTC (executive branch) exempted US Banks and Hedge funds (curiously the CFTC staffing is at the lowest - ever) - why did they exempt banks and hedge funds from speculating? Does this mean that the price of oil is potentially another bubble – like the internet bubble and the housing bubble and now we could have the oil bubble?
And why does the media seem to be afraid to talk about this?